A
Change in the Weather - The Silicon Valley Experiences the End of the
Internet Boom by Chris Kelly

The bartenders and waiters may have seen it more
clearly than anyone. Sonya worked at a trendy restaurant in San
Francisco's tech-heavy South of Market (SoMa) district, and she
remembers the IPO parties that closed off the upstairs bar, sometimes
twice a week. One intoxicated twentysomething after another would take
a glass of champagne or wine from her tray, lean toward her
confidentially, and say with a faint slurring of words, "I just became
a millionaire." But then the parties slowed to perhaps one a month, and
eventually they stopped altogether. In a few months, the restaurant
itself had shut down—bought by entrepreneurs who went
bankrupt almost as soon as the deal closed.

From
behind the counter of a less glitzy bar a few blocks north, Erica saw a
similar pattern—as she put it, "fewer apple martinis, and
more domestic beers." And among the smaller crowds of customers, an
increasing number announced that they were there to drown their sorrows
after being laid off.

Personal
stories like these, along with television and newspaper profiles (now
depressingly familiar) of once-upwardly mobile couples in which both
partners have been out of work for months, combine to depict the human
face of a recession in the Silicon Valley and surrounding San Francisco
area. Other high-tech enclaves around the country seem to have been hit
just as hard. In previous downturns, as the United States shifted away
from a manufacturing-based economy, we shook our heads at the sad
stories of "company towns" where the closing of a steel mill or
automobile assembly plant had decimated the employment prospects of
thousands of workers in a single stroke.

But
this time around, the entire tech sector is the company, and
high-priced urban locales like San Francisco are no less vulnerable
than Allentown, PA, or Flint, MI, were a decade or two ago. And if in a
bygone time we looked down our noses at relatively uneducated
ex-factory workers, faulting them for not going to college and basing
their livelihoods on their wits rather than their muscles or sheer
stamina... well, who do we blame now? Sure, we can say that it's just a
short-lived (if particularly vicious) winter before a better economic
climate returns, but don't you get the nagging feeling that out-of-work
prospectors may have sat around after the Gold Rush, saying to
themselves, "Yeah, I'm just waiting for the mining sector to pick up
again"?

The
sudden dumping of thousands of skilled employees into the high-tech job
market has sharply affected hiring practices in the Bay Area. Many
recruiting agencies (or headhunters, if you prefer) have drastically
cut back on staff or gone out of business altogether, as few companies
feel the need—or ability—to pay sizable commissions
when they can have up to 200 resumes from qualified applicants
overnight from a single posting on HotJobs.com, Monster.com, or
DICE.com.

And
the interview process often becomes more daunting as prospective
employers, knowing they hold the only plate of cheese at a convention
of mice, have fewer qualms about making interviewees race through
ever-longer mazes of tests and qualifications. Jeff, a QA engineer in
the peninsula south of San Francisco, recalls helping to quiz
applicants for an opening in his department, and the internal
nitpicking sessions that followed: "Everyone's background just blew me
away—any one of them could have done the job. And yet I'd
hear the programmers afterward saying, 'Well, he doesn't know the
kernel,' and I'd think, hey, I don't know the
kernel. And then I realized... if I didn't already work here, I
couldn't get hired."

But
if all this seems irrational to those who had become accustomed to the
high-tech boom, it's entirely plausible to argue that common sense has
simply returned to an arena where it had been absent for too long.
Mike, the founder of an Internet company who had the good fortune to
sell it just before the bubble began to burst, says, "It was the worst
time to be a real entrepreneur," adding that it is hard to focus on
"creating a great company and satisfying customers when all anyone
cares about is whipping up their valuation."

Mike
wishes he could claim to have been prescient about the severe crash of
the Internet economy, but the fact is, all he knew is that he had seen
enough. He could have sought a second round of venture-capital
financing for his business instead of selling it, and he says, "If I
had been proud of my company, I would have." But competing in a
get-rich-quick marketplace had become so surreal that he says, "It
wasn't something that I respected, or something that I
enjoyed… it just felt like a big scam." His sources of
funding were, as he puts it, "responding to bad ideas" as well as good
ones. And he didn't want to be part of a business world that had become
so indiscriminate about what really mattered.

In
fairness, it was hard for anyone to keep perspective during those giddy
days. As in 1849, there was a sense that if you stuck a shovel into the
ground (or cyberspace) anywhere, you'd strike gold. Certainly everyone
else seemed to be. And if joining the crowd meant cutting a few corners
or selling a string of buzzwords instead of a real business idea, well,
that was a temptation not everyone could fight off.

After all, it wasn't just individual crackpots or
obvious hucksters who fell in line behind questionable business ideas
like "paying people to surf the Web"—firms such as Cybergold
were backed by substantial venture-capital funding, and the city of
Oakland treated it as a genuine civic event when the company moved to a
downtown office building. (Cybergold's closing last August received
much less fanfare.) Technology seemed to be developing so quickly that
no possibility seemed implausible. The recent crash of Enron shows how
the sense of being on the cutting edge of capitalism, combined with the
lure of immense wealth, can blind even the most skilled business minds
to what their conscience might be telling them.

Looking
back on his experience, Mike says, "I believe we've done long-term
damage to entrepreneurship and innovation. People can't forget the
mentality and atmosphere" of doing whatever made the most money in the
short term, while neglecting the fundamental contributions that would
make a company successful in the long run. It's a hangover-like
feeling, mixed with uncertainty about the future, that much of the San
Francisco/Silicon Valley area shares.

As
for now? Mike's taking a break from the standard business world,
looking into education and the possibility of starting a charter
school. Jeff's company needs additional funding, and he's crossing his
fingers that they can find something in a tough capital market. The
waitress at the diner up the street, who left to become a tech writer
two years ago, is back serving tables. Like many others, they probably
find themselves looking back occasionally on a strange dream, a fever
that has subsided, a turbulent storm that tore through our lives
and—now that it has passed—seems just a bit unreal.

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